Candlestick Trading Blog

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When opening a forex trading account, there are a few different types of accounts that you should know about and consider. First of all, forex trading is the buying and selling of world currencies on the forex exchange. Before investors begin to trade forex they must set up a trading account. In today's article we discuss the three different types of trading accounts that investors can set up to perform forex trading

The first forex account we will discuss is the standard trading account. This is the most common account among the experienced and well-funded investors. With this account forex investors have access to standard 'lots' of currency with each lot worth $100,000. This doesn't mean you have to put down $100,000 to open the account but instead only need $1,000 to be in the margin account for one standard lot to be traded. Many like this type of account due to more services and perks for the investor. Also, it has a higher type of gain when dealing with pips when one standard 'lot' is traded. Forex brokers however require a higher starting minimum balance of anywhere from $2,000, $5,000 to $10,000. Also, just as there is potential for higher gain there is also potential for greater loss with this type of trading account, which is why it is recommended for well-funded and experienced investors.

Another type of forex account is the mini-trading account. This is basically just a trading account that allows forex traders to make transactions using mini-lots. The idea behind this type of account is so that brokers can offer a way for new and perhaps hesitant investors to enter the forex markets. They offer a mini lot that is equal to $10,000 instead of the standard lot that is equal to $100,000. This is great way for inexperienced traders to familiarize themselves with the markets without risking too much money. Also, new traders can use this account to test new forex trading strategies. These accounts can be opened with anywhere from $250 to $500 and risk management is considered. Of course with smaller risk comes smaller reward so once forex traders are comfortable they really should move to the standard account to make more money.

The last type of forex account we will discuss is the managed trading account. This account is different than the standard and mini accounts because the capital is still yours however the trading decisions are made by someone else. An account manager will handle the decisions made with this account just as a stock broker would handle a managed stock account. There are different types of managed accounts including a pooled fund and individual accounts. Pooled funds are shared with other investors while an individual managed account is just that. Many like having a professional handling their trading decisions and it helps with portfolio diversification. Most managed accounts however require a minimum of $2,000 for pooled accounts and a minimum of $10,000 for individual accounts. Additionally, account managers will of course charge a commission for their services.

Continue to learn about the different types of forex accounts and figure out which one is the best option for you. Good luck!

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